Macroeconomic and financial market commentary

Daily Archives: November 15, 2016

Perception might be the reality in your retina, and the only relevant factor when working to push the ballot count in your favor. But in real life, sooner or later, it is reality that inevitably prevails. That goes for economics as well, regardless of the easy fixes offered by Trump’s economic program, and others. Our present global economic reality is, at best, worrisome -and with a sad prognosis for the next couple of years (or more). That is a fact that can be perceived in many different ways. Make it opposite ways if you wish. But a fact after all.

In this world of relative beliefs, and prevalent wishful and/or politically correct thinking, finding the truth should still be the underlying quest. Learning the (economic) truth takes time and effort because it is complex and difficult to fully grasp and comprehend. It is so tiring, that we have come to accept that there is an infinite amount of truths for the same fact -depending on the color of the lenses of the viewer. Can’t find the underlying truth? Don’t stress out. Relative values have long faded absolute ones. Most think there are different truths depending on the eye of the observer. Nobody wants to find the naked truth anymore. It might be sobering, and it is not worth the effort involved. Or is it?

Bearing this in mind, we have to take the recent Trump event with a grain of salt. Here comes “the Donald”, now Mr. President, stating the obvious to all (by now): that monetary policy with its reiterated tools of financial repression, and abundant printing and lending, was not the way to go (Of late, Theresa May apparently also got that message as well). The issue is, for both, and for the rest of us, that despair and depression (of the economic kind) are not a great alternative to Keynesian wishful thinking. Nobody dares mention them.

Thankfully, “the Donald” and team have thought up something “new” in order to inject some badly needed optimism. A good old bricks and mortar revival conveniently sprinkled with some fresh lending. That ought to help him pull it off! After all, he knows both sectors well, his life has always been full of bricks and mortar, and debt -lots of it. I wonder why prolific Paul Krugman hadn’t thought it up beforehand (maybe too many vested interests in the Keynesian priesthood monetary cause).

We live interesting times. Hence, it was unsurprising to see a post-election healthy bid for Caterpillar and the Banks, while Alphabet, Amazon, and Microsoft were sold with disdain. The Dow up big, and the Nasdaq down correspondingly. Animal spirits are all over the place once again, because brick and mortar spending will save the day. Hip Hip Hooray!

Inadvertently, we are getting used to all this nonsense. A couple of months ago, just after Brexit, it was the promise of infinite NIRP and helicopter money taking equity markets to a new, if marginal, top. Now, it is the reflationary program that will allow the present economic cycle to endure. Only our species can be stupid enough to move from fiscal to monetary policy and then back again, reiterating the same mistakes “ad nauseam”. Whatever they do, they never try to fix the supply side. See (above) what infamous Yogi Berra had to say for situations of the sort. It always pays to smile when facing such a serious issue for mankind, particularly when high doses of Prozac are the only alternative. Continue reading →